SolarCity Shares Are Soaring

SolarCity shares are up 6.5% this morning after Deutsche Bank
initiated coverage with a "buy" rating and a $90 price target.

One day after BP said renewables are
now the world's fastest-growing energy source, Deutsche
Bank's Vishal Shah, Jerimiah Booream-Phelps, and Susie
Min write that the firm, which installs leased rooftop solar
panels that can generate electricity below utility
rates, possesses enormous growth
potential:

We estimate the company's market penetration is ~0.2% in
existing markets, which implies considerable room for expansion
within current markets and into new markets. We believe SCTY's
cumulative [megawatts] deployed can reach at least ~3GW by 2016
which would still imply only ~1% market penetration. Our 2016
estimates are likely conservative as the company has a target to
reach ~1M customers implying ~6GW deployed by mid 2018
timeframe.

The firm recently became the first to issue solar-backed
securities. The debt is paid back from revenue generated by
electricity sales. It plans to issue another round of the debt,
and DB says investors are "very interested" in them. "SCTY
recently priced first ever ABS deal at 4.8% and suggests a
potential for more follow on offerings, which could help lower
overall financing costs as investors become more comfortable with
the concept," they write.

Since their IPO in December 2012, the Elon Musk-chaired firm has
gained 480%. We profiled the firm as a survivor of
The Great American Solar Cull, which saw the number of
domestic solar companies, both in manufacturing and services,
contract and merge due to cost pressures.